Starting Small

3 Tips for New Investors

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My first investment was a small one—a two-bedroom house in Portland, Oregon. At the time, it was a such scary idea to purchase that property, because it felt like I was giving up a lot to make that investment. In reality it was just a few thousand dollars.

But that’s the irony of the advice to “start small” when it comes to investing: When you’re first starting out, nothing feels small, even when it is. It takes time to get comfortable with taking these leaps of faith and parting with your money—although the more research you do and more experience you gain, the less risky it is. After all, you still want to be able to sleep soundly at night.

After the first investment, Robert and I knew we were ready to graduate to larger investments and properties. So, we began investing in small, single-family homes. From there, we purchased a six-unit apartment building. Do you see the progression? Baby steps.

But what exactly does that mean? Let’s see what starting small looks like in reality:

  1. Take a deep breath

The first thing you should do when you’re getting ready to make your first investment is simply to pause, take a deep breath and relax. Easier said than done? It doesn’t have to be. Do your best to put aside how you’re feeling and instead look at the facts and figures. What is the real risk if the investment fails? Chances are, very little. Maybe you’ll lose a little money and come out with some hard-earned lessons. Now, examine the risk from not moving forward. You’ll never grow, learn, or get closer to financial freedom. So, I ask you: Which is worse? I firmly believe it’s being stuck without any options.

  1. Build your confidence through education

Do you still have dreams that you’re back in high school, it’s time for mid-terms and you didn’t study and don’t know any of the answers to the test questions? I think we all do. And that’s one of the worst feelings ever—the fear of not being adequately prepared. A big contributor to investing anxiety is to not feel confident in what you’re doing due to lack of knowledge.

“The best investment you can make is in your own abilities. Anything you can do to develop your own abilities or business is likely to be more productive.”—Warren Buffett

That’s why it’s imperative you take the time to study and understand your chosen asset category. This includes reading as much as possible and attending free workshops and online webinars. I knew I wanted to invest in real estate right off the bat, so even though I was nervous about making that first investment in Portland, I wasn’t worried about my ability to size up and find a deal. Being self-confident helped a lot.

  1. Think big even when investing small

I often tell people to start small with their first investment. However, let me be clear: This doesn’t mean you should think small. Quite the opposite, actually. You should think big when it comes to where you want to go and what you plan to achieve. The sky truly is the limit, so don’t add unnecessary boundaries to your dreams.

Once you’ve got your goal (and hopefully it’s one that scares you a bit, as there’s nothing quite as motivating as a scary goal), break it down into bite-sized sub-goals so that you aren’t left paralysed by where to begin. Always begin with the smallest step. Keep moving forward, first with little steps, small investments, and then progress to bigger steps. As your experience and confidence grow with each success—and yes, even through the setbacks—you will get closer and closer to your big goal.

Source: Rich Dad Education

By Kim Kiyosaki

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